what makes italy attractive? - mef · the evolution of italian trade balance structure what makes...

What makes Italy attractive?

Ministry of Economy and Finance

June 4, 2014

2

Export-oriented industry

Sound private sector

balance sheet

Strategic position

Strong manufacturing sector

Entrepreneurship and

high skills

Numerous reforms

undertaken

Key international player

Wide range of opportunities

Solid stock market

Increasingly flexible

labour market

Dynamic small and

medium enterprises

Italy’s strengths OVERVIEW


Italy in the global context

G8 member, the fifth manufacturing economy worldwide and

the third largest one in Euro Area.

Strong exports (almost €500bn of exports of goods and

services) and great presence in high-growth sectors

(robotics, mechatronics, biopharma, aerospace), not only the

Four Fs (Food, Fashion, Furniture, Ferrari).

One of the founders of the European Union and an active

player in the international scene.

A hinge-country between Europe and the Mediterranean and

Middle East regions.

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KEY INTERNATIONAL PLAYER


4

A strong manufacturing culture

STRONG MANUFACTURING SECTOR

Source: ISTAT


Agriculture &

Fishing Manufacturing Services

Weight of the

Area

North West 1.2 20.9 69.9 32.4

North East 2.2 22.5 67.5 23.1

Center 1.5 11.5 78.8 21.6

South &Islands 3.4 8.9 78.7 22.8

Value added – 2011 (%, current prices)

5

The 4th largest manufacturing sector per capita

STRONG MANUFACTURING SECTOR

Per capita industrial production

(current US$, 2012)

Source: Intesa Sanpaolo, Centro Studi Confindustria on national sources and Global Insight


0

5000

10000

15000

20000

25000

30000

35000

Germany Japan SouthKorea

Italy France UnitedStates

Russia Brazil China India

6

Industry switching to mid-tech specialisation STRONG MANUFACTURING SECTOR

The evolution of Italian trade balance structure


28,4 24,5 31,1

9,1 18,1

27,4 21.7

33.0

55.3

-6,3 -14,2

-7,6

-30

-10

10

30

50

70

90

110

1997 2007 2013

Eu

ro b

n

High Medium - High

Medium - Low Low

Source: Calculation on ISTAT data

7

Technology clusters boost firms’ performance STRONG MANUFACTURING SECTOR

144 districts. Topography (2008-2012):

12.709 firms

45.2% are exporting firms

Turnover increased over 20%

for 24.6% of business

22 districts specialising in high-tech

sectors in 2011: out of 9 in ICT, 5 in

aeronautics, 4 in biotech and

pharmaceuticals by each sector.

Source: Intesa Sanpaolo,“Economia e Finanza dei distretti industriali”, Annual Report, No. 6, December 2013.


Food

Machinery

Home system

Fashion system

Other sectors

8

Trade surplus leadership in the world EXPORT-ORIENTED INDUSTRY


-800 -600 -400 -200 0 200 400 600 800 1000

US -610

UK -99

France -34

Italy 113

S. Korea 205

Japan 292

Germany 394

China 866

Bn dollars Source: WTO

Manufacturing trade surplus,

(2012, >100 Bn dollars)

9

Italy’s export market shares are resilient EXPORT-ORIENTED INDUSTRY


13,5

9,3 10,2

5,3

3,6 3,0

3,7 3,3

1,9

3,2

0

2

4

6

8

10

12

14

16C

hin

a

Ge

rma

ny

US

A

Ja

pa

n

So

uth

Ko

rea

Ca

na

da

Fra

nce

Ita

ly

Spain

UK

%

Source: Calculation on UN-Comtrade data

2003 2012

10

Trade surplus leadership EXPORT-ORIENTED INDUSTRY

Note: The ranking is within the 5.117 world manufacturing.

Source: Fortis-Corradini Index, Fondazione Edison Analysis, May 2014

Italy – 2012 World Trade

surplus Ranking

Number of Products

(HS 1996)

First 235

Second 377

Third 323

Total 935


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Italy: 54% of export within Europe EXPORT ORIENTED INDUSTRY

Source: ISTAT

Italy is an export-led

economy; European

countries are the

leading trading partners.

Italy’s imports are

sizeable due to the lack

of oil, gas and raw

materials.

Top 10 - Leading trading partners (% of total exports)


2000 2010 2012 2013

Germany 15.2 13.0 12.5 12.4

France 12.7 11.6 11.1 10.8

US 10.2 6.0 6.8 6.9

OPEC 3.3 5.3 5.7 6.0

Switzerland 3.3 4.7 5.9 5.2

UK 6.9 5.2 4.9 5.0

Spain 6.3 5.8 4.7 4.4

Russia 1.0 2.3 2.6 2.8

Turkey 1.8 2.4 2.7 2.6

China 0.9 2.6 2.3 2.5

Redirection of exports to more dynamic countries

12

EXPORT-ORIENTED INDUSTRY

Italy ranks first among world

exporters of clothing, textiles

and leather products and…

… second in non-electronic

machinery, basic

manufactures and

miscellaneous manufacturing. (Source: UNCTAD/WTO, Trade Performance Index 2012).

Source: Calculation on ISTAT and World Bank data.

Note: Export share are calculated as a ratio on Italy’s nominal GDP,

for 27 countries and a minimum export share by 1%.


-.8

-.6

-.4

-.2

.0

.2

.4

.6

.8

Absolu

te c

hange o

f th

e s

hare

, %

valu

es

0 40 80 120 160 200 240

Growth of real GDP, % values

Regression line (correlation coefficient = 0.46)

Export and economic growth in main countries

(years 2000-2012)

Openness to trade

13

STRATEGIC POSITION

Around 6,500 km of motorways and 21.500

km of national roads; one of the most

developed freight village systems in Europe.

Links to European key connection systems.

21 trade ports with international line services,

263 ports scattered along 8.122 km of

coastline.

Second most important country in Europe for

maritime freight transport: 3 ports are

classified in the Top 20 of European container

ports in 2012: Gioia Tauro, Genoa and La

Spezia.

First EU country in maritime transport of

passengers with around 82mn passengers in

2011.

International ports, logistics

platforms and interports

Source: INVITALIA


Boosting infrastructure activity

A tax credit is introduced together with an exemption from

concession fees to encourage public-private partnership for

infrastructure projects in excess of €200mn.

New measures to speed up use of Structural Funds

(Commissioner ad acta, specific task forces and a National

Cohesion Agency).

14

STRATEGIC POSITION: NEW MEASURES TO SUPPORT INFRASTRUCTURE PROJECTS


Refinancing and support for infrastructure projects

€2bn over 2013–2017 to finance infrastructure projects for

regional motorways, railways maintenance, construction of

new underground lines and school buildings maintenance.

€300mn for road safety involving redevelopment of bridges,

viaducts, road tunnels.

Ports: abolition of the tax on small boats, simplification in

dredging procedures, reshaping of port taxes, more financial

autonomy for safety and maintenance works of ports.

15

STRATEGIC POSITION: NEW MEASURES TO SUPPORT INFRASTRUCTURE PROJECTS


16

Small is beautiful but … DYNAMIC SMALL AND MEDIUM ENTERPRISES

≈ 3,900 businesses with total revenues ranging

from €15mn to €330mn.

≈ 400 businesses with total revenues ranging from

€331mn to €3bn.

Higher revenue growth with exports equal to 40-

50% of total revenues.

Good profitability and solid balance sheets.

Account for about 50% of total Italian

manufacturing value added.

Large Italian companies account for only 8.4% of

total manufacturing value added and the

subsidiaries of foreign companies for 13%.

Source: Exagon, Mediobanca IV Capitalism, Area Studi Mediobanca and Centro Studi Unioncamere


17

… Italian companies need scale to compete DYNAMIC SMALL AND MEDIUM ENTERPRISES


Firm size in manufacturing - 2011

All companies Companies with at least 10

employees

Companies with at least 250

employees

Number of

firms

Average firm

size

Share of

firms %

Average firm

size

Share of

firms %

Average firm

size

Italy 425,481 9.2 17.2 28.2 0.3 718.1

France 206,998 14.8 14.3 41.6 0.7 840.8

Germany 207,847 34.3 36.7 38.0 2.0 908.5

Spain 182,162 10.6 17.1 31.5 0.4 680.9

Source: Eurostat, Structural Business Statistics

Entrepreneurial culture and high labour skills

18

ENTREPRENEURSHIP AND HIGH SKILLS

The Italian production network is based on strong

entrepreneurial culture (4 mn entrepreneurs), high quality

products in many economic sectors and export-oriented

attitude.

Italy ranks 2nd in Europe in terms of manufacturing

companies with a skilled workforce, which in turn

contributes to the high quality of Made-in-Italy products.

High skills gained with on-the-job training and closely

related to traditional craftsmanship, not well captured by

international statistics.


Extend the maximum duration of fixed-term

employment contracts without

causality requirement

from 12 to 36 months

Fixed-term contracts

limited to 20% of total

workforce. The limit can be waived by collective

agreements

Fixed-term

contracts can be

extended up to 5 times in

36 months

Apprenticeship contracts must be in writing. Simplification

for public training in

businesses

Compensation to apprentices equal to 35%

of the compensation outlined in the national labour

agreement

Electronic communication for Documento

Unico di Regolarità

Contributiva (DURC –

Social Security Compliance Certificate)

INCREASINGLY FLEXIBLE LABOUR MARKET

PURPOSE

Reduce rigidities and streamline the labour market, encouraging the use of flexible

contracts for young people entering the labour market.

Fixed-term employment and apprenticeship contracts

TIMELINE

March 2014


Young people (ages 15-29) can access, via an ICT platform, a network of customised services on training, employment

orientation and job opportunities

9 action fronts: i) reception; ii) training targeted to finding work placement; iii)

orientation; iv) apprenticeship; v) traineeship; vi) civil service; vii) support to

self-employment and entrepreneurship; viii) professional mobility; ix) employment

bonus. These measures will be included in the “Youth Guarantee” National Operational

Programme

Monitoring of implementation and financing

of the individual measures through

performance indicators


PURPOSE

Ensure that all young people receive an offer of good-quality employment, apprenticeship or

training offer within four months of leaving formal education or becoming unemployed.

Implementation of Italy’s ‘Youth Guarantee’ Plan

TIMELINE

May 2014


Streamline existing incentives for hiring

workers and those for self-employment and the establishment of own companies and establishment of a

National Employment Agency

Streamline entities and structures operating in

the realm of safety-nets, active policies

and employment services and upgrading

of public/private partnerships

Universal maternity benefit and social

security contributions for

working mothers in quasi-dependent

employment

Tax credit for female workers and encourage employers to

provide integrated child-

care services


PURPOSE

Ensure that users can benefit from essential services relating to active labour market

policies across the national territory. Achieving work-life balance as a parent.

Employment services, active labour policies and work-life balance

TIMELINE

September 2014


Italy is one of least indebted countries

23

SOUND PRIVATE SECTOR BALANCE SHEET


Aggregate debt

0

50

100

150

200

250

300

350

400

450

Germany 195%

US 264%

Spain 305%

Japan 412%

UK 284%

Italy 261%

France 255%

% o

f G

DP

Note: 2012 data for private debt; 2013 data for public debt.

Source: Bank of Italy

24


Debt-to-income ratio among the lowest

Source: Eurostat, 2012 data. Note: Gross debt-to-income ratio of households is defined as loans (AF4), liabilities

divided by gross disposable income (B6G) with the latter being adjusted for the

change in the net equity of households in pension funds reserves (D8net). Non-

consolidated figures.

Households Non financial corporations

Source: Eurostat, 2012 data. Note: Debt includes loans and securities other than shares. Non-

consolidated figures.


0

50

100

150

200

250

300

SK

SL

LV IT EE

FR

AT

BE

EA

-17 FI

PT

ES

LU IR NL

DE

LT

PO

HU

CZ

UK

SW DK

% o

f D

isp

osab

le i

nco

me

euro area

non-euro area

0

10

20

30

40

50

60

FR

SL FI

BE

NL

DE

AT

EA

-17

PT

LU

EE IT ES IR LV

SK

LT

PO

HU

CZ

UK

SW DK

% o

f G

ross o

pera

tin

g s

urp

lus

euro area non-euro area

Household debt-to-income ratio among the lowest in the EU

Households’ debt

(% of gross disposable income)

Households’ wealth

(Households’ wealth/gross

disposable income ratio)

25

10

30

50

70

90

110

130

2000 2002 2004 2006 2008 2010 2012

DE FR

IT EA

Source: Bank of Italy, Eurostat

4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5

8.0

8.5

2000 2002 2004 2006 2008 2010 2012

DE FR

IT EA



26

Italian households’ wealth and its components


Note: Preliminarly estimates for the first half of 2013.

Source: Bank of Italy, ‘La ricchezza delle famiglie italiane’, Anno XXIII, n.65, December 12, 2013


Eu

ro m

illio

n

Net Wealth

(8.542 mln in 2012)

Financial

Assets

(38.9% in 2012)

Real

Estate

(56.6 % in 2012)

Real

Assets

(61.1 % in 2012)

Financial

Liabilities

(9.5% in 2012)

Net wealth of

households is 7.8

times their

disposable income

(8.3 UK, 8.1 FR, 7.7

JP, and 5.3 US).

FTSE MIB: Corporate Italy

27

SOLID STOCK MARKET

Stock market capitalisation to GDP

Italy’s stock exchange is

part of the London Stock

Exchange Group.

328 listed companies, 752

listed ETP.

1040 fixed income listed

securities.

N. 1 in Europe both for

turnover velocity and fixed

income trades & turnover.


10

30

50

70

90

110

130

150

170

2000 2002 2004 2006 2008 2010 2012

Ind

ice

s 2

00

0=

10

0

Italy France UK

Spain Europe Germany

Source: World Bank

28

FTSE MIB: Corporate Italy SOLID STOCK MARKET

Source: Borsa Italiana


Euro bn Capitalization Sector

1 ENI 66.0 Oil & Gas

2 Intesa SanPaolo 40.1 Regional banks

3 Enel 38.6 Electric utilities

4 Unicredit 38.5 Regional banks

5 Generali 25.3 Insurance (life)

6 Luxottica 20.1 Medical equipment and supplies

7 Telecom Italia 15.6 Communication services

8 Atlantia 15.4 Finance

9 Sogefi 14.3 Automotive industry

10 Cobra Automotive Tech. 11.3 Telematics and electronics infrastructure

Top 10 by Capitalization (31-03-2014)

29

Product market reforms by sectors

NUMEROUS REFORMS UNDERTAKEN


OECD Product Market Regulation Indicator - Italy

A low number means a

less regulated sector

Expand contributions

from institutional investors to

SMEs, incentives for

credit alternatives

such as mini-bonds

Strengthening and refinancing (Allowance for

Corporate Equity – ACE)

Fund for the concessional tax treatment for Business

Networks

Incentives for investment in

SMEs that have gone public or are about to go

public

Support seed and venture

capital as well as new

innovative firms

PURPOSE

Extend the sources of corporate funding, consolidate corporate financial structure

and reward business networks.

privati

Corporate finance for growth

TIMELINE

September 2014


SEVERAL REFORMS IN THE PIPELINE

Re-organisation of regulations

governing local public services and upgrades of municipal

companies and local utilities

Deregulation and implementation of

existing regulations

(Annual Competition Law)

Enhance marketing of

‘Made in Italy’ products

Tax relief and streamlined

procedures for FDI.

Strengthening the Customs

One-Stop Shop for Companies

Overhaul of the rules governing deductible costs

of business transactions with

suppliers in blacklisted countries

PURPOSE

Release market potential. Support internationalisation and exports of Italian companies,

making things easier for companies already operating in foreign markets.

Competition, deregulation and internationalisation of businesses

TIMELINE

September 2014



Boost R&D investment

and tax credits for research

activities and hiring of

researchers

Tax benefits for firms

upgrading their

production sites

Strengthening the Central

Guarantee Fund for lending to

SMEs

Cut energy bills for SMEs by 10%.

Diversification of supplies and completion of

deregulation in the electricity and gas

market

Implementation of ‘Destinazione Italia’ with simplifications

and incentives dedicated to

foreign investors

PURPOSE

Help boost investments focused on innovation and revitalise corporate lending. Cut costs for

SMEs by improving business environment. Promote investment attraction in Italy.

Boost investment and cut energy bills

TIMELINE

September 2014 and December 2014 (for investment attraction)



Established a ‘mission unit’ to

implement measures to

prevent hydrogeological

risk and soil protection

Start clean-up of polluted sites of national interest (SIN). Fund to relocate heavy industrial plants

currently in densely populated areas. Design

regulations on proper waste management

tariffs

Speed up environmental clean-up and rehabilitation

efforts by polluters and promote

industrial redevelopment of formerly polluted

sites

Simplify procedures to access CAP funds.

Establish an Organic Farming Information

System (Sistema Informativo per il Biologico-SIB).

Implement labelling laws to protect Made in

Italy trademark

PURPOSE

Make the most of Italy’s resources, land and environment. Promote competitiveness and

export potential of agricultural sector and the quality of Made in Italy products.

Green growth and efficient use of resources

TIMELINE

November 2014



Adopt the National Strategic

Tourism Plan. Introduce

appropriate financial

instruments to encourage

entrepreneurs and to upgrade

facilities

Incentives to tourist and cultural business networks.

Grant incentives to greenfield and brownfield

tourist development projects that create jobs. Start a

digitisation plan aimed at increasing the online

presence of hotels and accommodation facilities

Develop a single set of nationwide

regulations on hotel

classification, establishing

minimum national

standards of excellence

Encourage investment beyond a minimum threshold,

in particular investment relating to the development of

selected tourist centres, especially in

Southern Italy. Upgrade tourist

education

PURPOSE

Realise full benefits from tourism potential. Affirm the uniqueness of Italy’s values by

protecting and promoting cultural activities and assets.

Tourism and culture as drivers of growth

TIMELINE

October 2014



35

Privatization Plan 2014 - 2015

Postal & financial services,

ICT, logistics

40% of the company

to be sold through IPO

Company Name - Relevant Sectors

4% of the company

to be sold through market

placement

Shipbuilding, cruise liners,

yachts, naval-oil & gas

vessels

40% of the company

to be sold through IPO,

including a capital increase

60% of the company


Export finance,

credit insurance

CDP Reti Gas transportation

(30% stake in Snam)

& power high voltage

(30% stake in Terna)

49% of the company

to be sold through trade sale

Air traffic control 49% of the company


Transaction

description

Oil & Gas

TLC infrastructure

provider for RAI broadcast

Opening to private capital

WIDE RANGE OF OPPORTUNITIES

2014 2015

Company Name - Relevant Sectors

Transaction

description

Railways company Opening up to private

capital, different options

currently under study

Further measures

Municipal

utilities

Companies that provide public

utilities at a local level

(transport, energy, waste

collection and management)

Public real

estate assets

Real estate assets,

State and local authorities

properties

Opening to private capital

and significant aggregations

through mergers

New disposal plan of public

real estate assets

0.7% GDP yearly from 2014 to 2017

Expected income from privatization schemes

and real estate assets disposal plan


Italy’s inward FDI stock position: ready for a pick up

36


0 20 40 60 80 100

Chemical products

Food products

Legal, accounting

Monetary intermediation

Other business activities

Trade and repairs

Transports

Fin. holding companies

Other fin. intermediation

Real estate & business

Fin. internediation

Manufacturing

2012 2008

Euro bn Source: OECD dataset


Providing certainty to FDI investors

WHAT’S NEXT WHAT HAS ALREADY BEEN DONE

Certainty of Taxation

• Review of tax sanctions and litigation legal framework

• Review of tax havens “black list”

Certainty of Rules

• Review of the abuse of rights

• Consolidate Labour law

Certainty of Procedures

• Reform of “Conferenza dei servizi”, which approves all major authorization procedures for industrial plants

• Facilitate real-estate investment through simplification of procedures

Certainty of Taxation

• Closer collaboration between Italy’s Revenue Agency and investors. Tax agreements and dedicated desk

• Tax credits for research & development expenses

• Extensive cuts to the tax wedge

• Lower taxes on young people salaries

Certainty of Rules

• Creation of specific Business Courts for foreign investors

• Simplification of Court proceedings

Certainty of Procedures

• Simplification of authorization procedures

• Facilitated financing for SMEs including through access to capital markets

• Dedicated visas for investors, researchers and foreign students

37



Finance for Growth

April 2014: Launch of Finance for Growth, to promote credit

enhancement and the development of alternative forms of

financing especially for SMEs.

Areas of intervention: Credit guarantees; Credit funds;

Minibond funds; ACE (Aid to economic growth); Crowdfunding;

Venture capital funds; Long term investors; PPPs.

Government’s priority to bring finance for growth high on the

European Agenda, also in the perspective of the Italian

Presidency.

38



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